A recent investigation by the Competition and Markets Authority’s (CMA) independent inquiry group has revealed that competition in the UK cloud services market is not functioning as effectively as it could.

Cloud services form the backbone of modern business operations, supporting industries ranging from financial services and retail to digital start-ups and public services. In 2023, UK businesses and organisations spent £9 billion on cloud services, with this figure growing over 30% annually. However, the inquiry group identified several concerns:

  • Limited provider options: The market is dominated by two providers: Amazon Web Services (AWS) and Microsoft. These together account for up to 80% of UK cloud spending. Google, which is the third largest provider, has a much smaller share, while other providers struggle to meet the diverse needs of businesses.
  • Barriers to switching providers: There are technical and commercial challenges that make it difficult for businesses to switch cloud providers or to use multiple providers. This often locks businesses into their initial choices, which may not remain suitable as their needs evolve.
  • High barriers to entry: The substantial capital investment required to enter the market restricts competition, making it challenging for new providers to compete or grow.
  • Anti-competitive practices: The inquiry group concluded that Microsoft leverages its dominant position in software to create disadvantages for competitors like AWS and Google. For example, its licensing policies make it harder for businesses using Microsoft software to choose alternative cloud providers.

What is the potential impact on UK businesses?

These findings indicate that limited competition may lead to higher costs, reduced innovation, and lower service quality for businesses. When cloud providers face insufficient pressure from competitors, businesses miss out on better deals and cutting-edge solutions that drive productivity and growth.

Proposed remedies and recommendations

The CMA inquiry group has proposed several measures to address these issues:

  • Strategic Market Status (SMS): AWS and Microsoft could be designated with SMS under the Digital Markets, Competition and Consumers Act (DMCCA) 2024. This designation would allow the CMA to impose legally binding requirements to address anti-competitive practices.
  • Potential interventions: Measures could include ensuring fair software licensing, reducing costs for switching or using multiple providers, and encouraging technical standardisation.

What this means for your business

As a business owner, the outcomes of this investigation could help to reduce the costs you pay for cloud services you use, improve the quality and range of cloud services available, and make it easier to change providers when your business needs this.

The CMA will consult on its provisional findings and recommendations, with a final decision expected by the statutory deadline of 4 August 2025.

If you would like to participate in the consultation, or for more details, see the CMA’s cloud services market investigation case page.

See: https://www.gov.uk/government/news/cma-independent-inquiry-group-publishes-provisional-findings-in-cloud-services-market-investigation